Disgraced former Transnet boss Brian Molefe may face criminal charges for a raft of corruption and financial misconduct offences relating to the purchase of 1,064 new locomotives. 
He may also have to pay back some of the almost R19-billion he is accused of squandering on the deal.
A draft forensic report by Mncedisi Ndlovu & Sedumedi Attorneys says Molefe, who was CEO of Transnet between 2011 and 2015 before joining Eskom, misled the board into approving costs, and concluded financial transactions without board approval.
It paints Molefe as a liar who misled the board to approve a cost increase in the deal, citing fluctuations in currency value and variations in cost.The 144-page report was presented to the Transnet board on Wednesday. It says that Molefe and Gupta lieutenants Anoj Singh, Salim Essa and Iqbal Sharma were central to misrepresenting to the board the true reasons for increasing the locomotive deal by almost R16-billion to R54-billion in 2014, and awarding the lucrative deal to Gupta-linked companies.
PERSONALLY LIABLE
The report recommends that Molefe be held personally liable for some of the losses and that monies, possibly amounting to billions, be recouped from him.
"Given his previous position as group executive, Transnet should also recoup monies lost due to his conduct," the report says.
"If there is suspicion that Singh, Molefe and/or any other member of the committee had unduly benefited from the transgression or if there is evidence that shows they misled the board as a result of corruption, Transnet is required by law to report such known or suspected corruption to the law enforcement agent," it says.
The report says Singh, Essa and Sharma should also be charged criminally. Transnet's former general manager of integrated supply chain management, Garry Pita, should also be charged criminally for financial misconduct relating to variation orders amounting to R1.2-billion.
Molefe should be held liable for the inflated cost of about R16-billion in that the original amount of R38.6-billion already included "hedging and forex escalations". He should also be held liable for R2.7-billion that was incurred when a decision was taken to split the award among several bidders.Molefe's lawyer, Barry Farber, said yesterday: "If they are going to charge my client as the report is said to have recommended, we are going to fight the case in court and not through the media. My client is innocent until proven guilty".
A senior official said: "The report paints a clear picture that the rot is much deeper than Brian Molefe and Anoj Singh. One thing guaranteed is that there will be disciplinary proceedings, criminal cases and civil actions."
Molefe has been plagued by one scandal after another and resigned from Eskom in November 2016 after being implicated in state capture by then public protector Thuli Madonsela.
Shortly afterwards the Sunday Times revealed that he had been promised a R30-million pension payout, despite only being at the utility for 18 months. After a short stint in parliament, the public enterprises minister at the time, Lynne Brown, reinstated him at Eskom. The move was challenged by several organisations and on January 25 the high court ruled that Molefe's reinstatement was "at variance with the principle of legality and is invalid and false".
In April, Molefe was denied leave to appeal against another high court ruling that he was not entitled to a pension payout and should pay back the R11-million already advanced from the R30-million pension deal.The draft forensic report also casts the spotlight on Transnet's current group CEO, Siyabonga Gama, and several senior officials. It recommends that Gama face three internal disciplinary charges for his part in misrepresentations to the board that allowed for the exaggerated increase.
Gama should also answer for failing to "exercise reasonable care and skill in his decision to split the award among more than one bidder". That alone cost Transnet R2.7-billion.
Yesterday Gama said: "It is not the appropriate time for me to comment on this draft interim report. The board chairman, Dr Popo Molefe, has planned a media conference next Wednesday to address various matters about Transnet. I expect that the chairman will also address the now famous Werksmans and MNS interim reports. I believe I should therefore not respond to your questions. We have all the answers in various archived documents and await the board direction on the way forward."
Yesterday, Pita said: "The finding is incorrect and I find it ridiculous, baseless and hard to believe."He said internal auditors were part of the process and "were happy Transnet complied with its policies and procedures. It was also audited by external auditors who were comfortable that there were no violations of the Public Finance Management Act."
Singh and Sharma - business associates through the interest they had in a company called VR Laser - declined to comment.
Essa could not be reached for comment.
Other senior Transnet employees recommended for internal disciplinary hearings include Ravi Nair, Thamsanqa Jiyane, Lindiwe Mdletshe, Yousuf Laher, Danie Smith and Buhle Ndlovu. They are to be charged with, among other things, breaching the Public Finance Management Act.In 2012 Transnet embarked on a fleet replacement programme to replace some of its 37-year-old trains. Four suppliers reportedly benefited from the tender. One company of note is China South Rail, which is also the Guptas' business partner.
Shortly after the contracts were signed in March 2014, there were allegations that the Chinese rail giant had paid bribes of more than R5.3-billion to Essa to be part of the deal. Essa's bank account, into which the alleged bribes were said to have been paid, was frozen and he is facing an investigation by the Asset Forfeiture Unit.
The request for proposals for this tender strictly stipulated that the 1,064 new locomotives must come with local content and supplier development obligations in order to help create jobs and grow the local economy. But after it was awarded the contract, China South Rail applied to the government for an exemption from its local content obligations, worth R5-billion, in its ongoing supply of new locomotives to Transnet.
"It was a great deal to move our country forward in terms of transportation, but some greedy individuals saw an opportunity to make some money," a source with intimate knowledge of the tenders said.
SERIOUS BREACHES
Initially, the contract would have cost Transnet R38.6-billion over seven years. However, this escalated to R54.5-billion following serious breaches of statutes, regulations, corporate governance and unlawful conduct in relation to the transactions, the report says."The results of all the above renders the procurement of the 1,064 locomotives susceptible to judicial review for failure to adhere to applicable legal framework," reads the report.
"Taxpayers' money was lost in inflated prices of the 1,064 locomotives."
The report says that "fairness of the evaluation process was compromised by the material changes that occurred during the evaluation process" and that request for proposals documents issued to the bidders were not compliant with the law, thus irregular.
This is the second report after Werksmans Attorneys submitted a report to the board in December. Transnet commissioned an investigation in July after allegations surfaced that massive kickbacks had been paid on the deal.
In some instances the report recommends further investigations.
TRANSNET CHAIRMAN POPO MOLEFE RESPONDS:
We can confirm the Transnet board has received the Werksmans report and the preliminary report by MNS Attorneys.
The board is considering the two reports and will make known its decision once the report has been properly and adequately interrogated.
The board received detailed presentations from both firms, Werksmans and MNS, separately on Wednesday June 13.
The board has engaged with the presenters and agreed on a process to be followed. The board will deal with these matters next week.
The issues raised in these two reports are of a serious nature and warrant that the board applies its mind fully to ensure good corporate governance is upheld.
We are a country and a company that believe in the rule of law and to this extent, the board will follow processes and avoid acting impulsively.
We would like to assure the country that the board will act in a fair and equitable manner when dealing with these allegations.
The new board will soon call a press conference to share what it has done since its appointment on May 24 2018...